MANUFACTURING: Macadams Takes A Smack
Recent Western Cape Business News
BLACKHEATH-based Macadams Bakery Supplies, which manufactures ovens and other baking equipment, has been hammered by the global economic slowdown.
With a presence in 65 countries, Macadams was one Western Cape business very vulnerable to the fall out from the 2008 financial crisis, which put the majority of major economies into recession.
Macadams is now part of the Universal Industries Group, which also owns cold storage service facilities.
In the six months ending June 2009, Macadams saw turnover dropping 20% from R133 million to R107 million.
Naturally, efforts to ensure market share was badly eroded and saw trading margins crumbling - leaving operating profits down by more than two thirds at just R6.7 million (after recording a more wholesome R21 million in 2008).
Universal Industries CEO Darryl Paynter says trading is primarily with food retailers in South Africa as well as Africa.
He says the global economic downturn and the crisis in the world’s banking sector had a profound effect on the trading environment through the delay of capital projects and the unavailability of finance to facilitate expansion by the company’s customer base.
But Paynter says as the SA food chains remain the company’s most significant client base it is encouraging to see the sector is still reporting reasonable results and maintaining a healthy financial position. “This should allow for continued capital expenditure on new as well as replacement equipment.” He adds that aside from supplying new stores, the very large base of baking equipment that is already installed in food retailers does require periodic replacement.
Paynter reports that Macadams export department saw a marked decline in sales with export sales declining to 30% of total sales. In the previous year export sales made up around 35% of total sales.
Paynter, however, reiterates that Macadams remains committed to the export market and will continue investing in staff and resources to ensure market penetration into more territories.
While further new market forays seem less-than-prudent at this difficult juncture in the world economy, Paynter reports that trading conditions “seem to have stabilised.”
He says Macadams has already seen some improvement in the level of its order book and an improved performance for the second half of the financial year is anticipated.
Whether Macadams can make a full recovery by the end of December 2009 remains to be seen. But with only R7 million earned in profits in the first half, the R21 million earned in financial 2008 looks a fair way off.
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